Despite the growth of banks, microfinance institutions, and digital loan apps, informal lending continues to play a major role in the financial lives of many people in Accra.

Across markets, neighborhoods, and workplaces, individuals still borrow money from friends, family members, local moneylenders, and rotating savings groups. These informal financial systems have existed for decades and remain deeply embedded in many communities.

While formal financial services have expanded significantly in recent years, several economic and social factors explain why informal lending continues to thrive in Accra.

What Is Informal Lending?

Informal lending refers to borrowing and lending money outside the formal banking system.

Unlike bank loans or microfinance loans, informal lending arrangements usually operate without official contracts, credit checks, or institutional oversight.

Common forms of informal lending include:

• Loans from family members or friends

• Community savings groups

• Market-based moneylenders

• Rotating savings and credit associations

These systems often rely heavily on trust and social relationships.

Limited Access to Formal Banking Services

Although Ghana’s banking sector has expanded, not everyone has equal access to formal financial services.

Some individuals may face challenges such as:

• Lack of formal employment records

• Insufficient collateral for loans

• Limited credit history

• Complex loan application processes

As a result, many people turn to informal lenders who are willing to provide credit quickly and without extensive requirements.

Financial institutions regulated by the Bank of Ghana typically follow strict lending procedures, which may not be suitable for everyone.

The Importance of Speed and Convenience

Another reason informal lending remains popular is the speed of access to funds.

Borrowing from a friend, family member, or local lender can often happen within hours or even minutes.

In contrast, bank loans may require documentation, application reviews, and approval processes that take several days or weeks.

For individuals facing urgent financial needs, the convenience of informal lending can be very appealing.

Strong Community and Social Networks

In many communities, financial relationships are built on trust and social connections.

People may feel more comfortable borrowing from individuals they know personally rather than from large financial institutions.

Community-based lending systems often function through mutual support networks, where members help each other during financial challenges.

These social structures make informal lending an important part of everyday financial life.

Flexible Repayment Arrangements

Informal lenders often provide more flexible repayment arrangements than formal institutions.

Borrowers may be able to:

• Negotiate repayment timelines

• Make partial payments

• Delay repayment during financial difficulties

This flexibility can make informal loans more attractive to individuals with irregular income.

Workers in the informal sector—such as traders, artisans, and freelancers—often prefer loan arrangements that can adapt to fluctuating earnings.

Cultural and Traditional Financial Practices

Informal lending is also closely linked to traditional financial practices that have existed for generations.

One example is the susu system, a community-based savings and lending practice where individuals contribute money regularly and receive lump-sum payouts.

Susu groups are widely used across Ghana and remain an important financial support mechanism for many households and small businesses.

Because these systems are familiar and trusted, people often continue to rely on them even when formal banking options are available.

Challenges of Formal Lending

Although banks and microfinance institutions offer valuable services, some borrowers perceive formal loans as difficult to obtain.

Common concerns include:

• Strict eligibility requirements

• High interest rates

• Collateral requirements

• Complex paperwork

These barriers can push individuals toward informal alternatives that appear simpler and more accessible.

Risks Associated with Informal Lending

While informal lending offers convenience, it also carries certain risks.

Because these arrangements are often based on personal relationships rather than legal contracts, disputes can sometimes arise.

Potential risks include:

• Lack of legal protection

• Unclear repayment agreements

• Personal conflicts between lenders and borrowers

• High interest rates from some private moneylenders

Borrowers should therefore approach informal lending carefully and ensure that repayment expectations are clearly understood.

The Growing Role of Digital Finance

As mobile technology continues to expand, digital financial services are gradually changing the lending landscape in Ghana.

Telecommunications companies such as MTN Ghana and Telecel Ghana have helped increase access to mobile money services that support digital payments and lending platforms.

These innovations are creating new opportunities for individuals who previously relied solely on informal financial systems.

However, informal lending remains resilient because of its strong community roots and flexibility.

The Future of Informal Lending

Informal lending is likely to remain an important part of Ghana’s financial ecosystem for the foreseeable future.

While formal financial institutions and fintech platforms continue to expand access to credit, informal systems still provide unique advantages such as trust, flexibility, and cultural familiarity.

The future financial landscape may involve a combination of both formal and informal systems working alongside each other to meet the diverse needs of borrowers.

Conclusion From ASJ

Informal lending continues to thrive in Accra because it offers speed, accessibility, flexibility, and strong community support networks.

For many individuals—particularly those working in the informal sector—these systems provide practical financial solutions that formal institutions may not always offer.

However, borrowers should also be aware of the potential risks associated with informal lending and approach such arrangements carefully.

As Ghana’s financial sector evolves with the growth of digital finance and expanded banking services, both formal and informal lending systems will likely continue to shape how people access credit and manage their finances.

FAQs

What is informal lending?

Informal lending refers to borrowing money from individuals or community groups rather than banks or financial institutions.

Why do people in Accra use informal lenders?

Many people choose informal lenders because they offer faster access to funds, flexible repayment terms, and fewer requirements.

Are informal loans legal?

Informal lending is common, but it typically operates outside formal financial regulation.

What are susu groups?

Susu groups are community-based savings and lending systems where members contribute regularly and take turns receiving funds.

Is informal lending risky?

It can be. Because agreements may not be legally documented, disputes and misunderstandings can sometimes occur.

Source: Accra Street Journal 

Last Updated on March 14, 2026 by Samuel Kwame Boadu

Samuel Kwame Boadu

Samuel Kwame Boadu is a Ghanaian media entrepreneur and storyteller with a passion for amplifying urban voices and uncovering everyday truths. He is the Editor-in-Chief and Founder of Accra Street Journal, a dynamic digital platform dedicated to capturing the pulse of Ghana’s capital—its people, culture, challenges, business, sports and innovations.

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